State by State Data

Pell Grants

Unlike its House counterpart, the Senate’s 2018 budget resolution expected to pass tonight or tomorrow does not detail cuts to student loans and Pell Grants. However, it proposes overall spending levels that would require similar if not exactly the same cuts to student aid proposed in the House’s budget resolution that passed in early October. We’ve previously called attention to these proposals, including the elimination of all mandatory funding for Pell Grants. Today we focus on another of these unnecessary and harmful proposals—an arbitrary maximum income cap that would eliminate Pell Grants for students with household incomes above a fixed threshold, regardless of family size or other financial circumstances that affect their ability to pay for college. Attempting to limit Pell Grant eligibility in this way is not new, but the current political climate in which the proposal is being advanced, combined with recent external encouragement, makes resisting such efforts more urgently critical.

Arguments for a maximum income cap rely on the unsupported assertion that an increasing share of Pell Grants are going to “middle income” students who don’t have nearly as much financial need as the lowest income students. However, data clearly show that the vast majority of all Pell Grant recipients continue to have family incomes of $40,000 or less, and furthermore that the median family income of Pell Grant recipients (in 2011-12, $26,100 for dependents and $12,700 for independents) has been declining over time.

Additionally, the federal aid eligibility formula rightly recognizes that while income is a central component of a family’s ability to contribute toward the cost of college, income alone is an insufficient determinant of financial need. In addition to income information, the federal financial aid formula also takes into account factors including assets, taxes paid, household size, and the number of family members in college at the same time—factors that directly affect a family’s ability to afford college for each student. For example, of the Pell Grant recipients with family incomes above $40,000, more than two-thirds have families of four or larger, and almost two in five have families of five or larger.* Of the just 10% of Pell Grant recipients with family incomes over $50,000, almost four in five (79%) come from families of four or more, and many have more than one family member in college. While an income of $50,000 may be near the median US income, larger families must use that “middle” income to cover basic needs for more family members, and potentially to cover college costs for more than one family member at the same time.

Establishing an arbitrary maximum income cap would undermine college access and completion goals by forcing students with very high financial need to make up for lost grant aid by working longer hours, taking out more loans, or forgoing college altogether. Pell Grant recipients already face disproportionate debt burdens in attending and completing college: Nearly nine in 10 Pell Grant recipients who graduate from four-year colleges have student loans, and their average debt is $4,750 more than students who did not receive a Pell Grant.

Now is the time to protect and strengthen the Pell Grant for all students with significant financial need, not arbitrarily restrict access to those grants.

In March, we showed what it would mean for students if the House Republicans acted on their proposal to eliminate all mandatory Pell Grant funding. Republicans on the House Budget Committee are expected to include this extreme cut in their FY18 Budget this week. In response, we’ve updated our analyses with the latest data from the Department of Education and Congressional Budget Office (CBO). New data show the same grim story: eliminating mandatory funding threatens the existence of the Pell Grant as we know it, putting higher education out of reach for millions of Americans who rely on the grant to attend and complete college.

Eliminating mandatory funding would cut $78.5 billion from Pell Grants over ten years. For FY18 alone, mandatory funding provides $7.5 billion for Pell Grants, which is equivalent to the average Pell Grant award for two million students—over one in four students projected to receive Pell Grants in 2018. This is the same number of Pell Grant recipients attending college in Texas, Florida, Illinois, Pennsylvania, Wisconsin and Ohio combined.

The May FY17 spending agreement already cut $1.3 billion from Pell Grants, and the House FY18 Labor, Health and Human Services, and Education appropriations bill now under consideration includes an additional $3.3 billion cut (a move echoing the President’s own request in the Administration’s FY18 Budget Proposal). Eliminating mandatory funding on top of cutting $4.6 billion from Pell Grants would undermine the program’s current solid fiscal footing, abruptly creating a funding gap that would increase each year and require cuts to grant amounts, recipients or both.

If Congress cuts $3.3 billion from Pell Grants and eliminates the $7.5 billion in mandatory funding for FY18, simultaneous cuts to grant amounts and/or eligibility would be necessary to avoid a $2.9 billion funding gap that would immediately appear. Even if Congress rejects the $3.3 billion cut, eliminating mandatory funds in FY18 would lead to a $7 billion Pell Grant funding gap the next year (FY19). To close that gap, Congress would have to eliminate grants entirely for 1.9 million students or cut all students’ grants by an average of over $900, or both eliminate and cut grant amounts.

This brazen plan to create a funding crisis that could only be resolved by making severe cuts to Pell Grants is a clear assault on low-income students’ access to higher education. Rather than put college and a career further out of reach for millions of Americans, Congress should be safeguarding and investing in Pell Grants.

"Today, Representatives Susan Davis (D-CA) and Bobby C. Scott (D-VA), and Senators Mazie Hirono (D-HI) and Patty Murray (D-WA), introduced the Pell Grant Preservation and Expansion Act. The bill would increase college affordability and access by securing, improving and expanding the Pell Grant, which is the federal government’s most effective investment in higher education. Congress just cut $1.3B from Pell Grants for FY2017, and the President and House Republicans are proposing to cut billions more in FY2018. In stark contrast, these legislators are providing the leadership we need for students and families struggling to pay for college.

"Each year, more than 7.5 million students rely on Pell Grants to afford college. Yet, the current maximum grant covers the lowest share of public college costs in over 40 years, and will lose its annual inflation adjustment after this year. Boosting the purchasing power of the grant and permanently indexing it to inflation to prevent additional erosion of its value are investments we know are critical to increasing college access and success. The bill includes these and other important improvements that TICAS has called for, including extending the lifetime eligibility limit for Pell Grants, resetting eligibility for students defrauded by their schools, and making Pell Grants a mandatory program to guarantee sufficient annual funding and eliminate any uncertainty for students.

"We thank Representatives Davis and Scott, and Senators Hirono and Murray for their longstanding and continued leadership on college affordability, and Pell Grants specifically. Pell Grant recipients are already more than twice as likely to borrow to attend and complete college, and leave school with significantly more debt than their higher income peers. As college costs and student debt continue to rise, we urge Congress and the Administration to work together on making the Pell Grant program, the cornerstone of federal financial aid, work even better for America’s students and the American economy rather than debating how to cut it."

This House plan to eliminate mandatory Pell funding would have profoundly harmful effects for students and put college further out of reach for millions of Americans. Mandatory funding currently pays for $1,060 of the current maximum Pell Grant (almost one fifth of the $5,920 grant in school year 2017-18), which already covers the lowest share of the cost of attending college in over 40 years.

The $7.2 billion in mandatory Pell Grant funding in FY 2018 alone is the equivalent of the average Pell Grant awards for 2.0 million students—one in four students receiving Pell Grants. This is more than all the Pell Grant recipients attending college in Texas, Florida, Illinois, Wisconsin, and Ohio combined (1.9 million students).

Prior harmful cuts to Pell Grants, combined with an improving economy, have reduced program costs and created temporary reserve Pell Grant funding. Student advocates and more than 100 members of Congress have called for using this reserve to restore some of the lost purchasing power of Pell Grants and to reinstate access to grants year round. Rather than invest these reserve funds in Pell Grants for students, the president’s budget simply cuts $3.9 billion in FY 2018. The House plan that would restore grants year round while cutting $77 billion over 10 years means Congress will almost certainly drain the reserve funds, briefly hiding the full magnitude and consequences of eliminating mandatory Pell Grant funding.

The House proposal to eliminate all mandatory funding would cut Pell Grant funding by $7.2 billion in FY 2018 alone. Even if Congress used all the Pell Grant reserve funds to replace the Pell mandatory funding in FY 2018, it would lead to a $2.7 billion Pell Grant funding gap the next year (FY 2019). To close this gap, Congress would have to eliminate grants entirely for more than 700,000 students or cut all students’ grants by an average of almost $350, or both eliminate and cut grants. The funding gap would increase each year, requiring even more severe Pell Grant cuts going forward.

It is unconscionable to create a Pell Grant funding crisis by eliminating all mandatory funding and try to mask it using the program’s temporary reserve. Rather than making deep cuts to Pell Grants, Congress should instead invest existing Pell Grant funding in helping students whose urgent needs include restored access to grants year round, an increase in the maximum award, and an extension of the grant’s inflation adjustments that expire after this year (FY 2017).

While the President’s proposed budget fully funds the scheduled increase in the maximum Pell Grant and continues to tie it to inflation after 2017, the House Budget Committee’s FY17 budget eliminates the $120 increase scheduled for 2017-18 and freezes the maximum grant at $5,815 for 10 years.

In the 1980s, the maximum Pell Grant covered more than half of the average annual cost of attending a four-year public college. Cutting the maximum grant and freezing it for the next 10 years would reduce the share of covered costs from an already record low of 29 percent in 2016-17 to just 21 percent by 2026-27, making college even less affordable.

Sources: Calculations by TICAS on data from the College Board, 2015, Trends in College Pricing 2015, Table 2, http://bit.ly/1Pyv2sJ, and U.S. Department of Education data on the maximum Pell Grant. Calculations for 2017-18 through 2026-27 assume that the maximum Pell Grant is frozen at the 2016-17 level. College costs are defined here as average total in-state tuition, fees, and room and board costs at public four-year colleges. Projected college costs for future years were estimated by using the average annual increase in costs over the most recent five years.

Yesterday, Corinthian Colleges abruptly closed its remaining 30 campuses in California, Arizona, Hawaii, New York, and Oregon, where 16,000 students were enrolled. While nothing can give these students back the time they spent at Corinthian, they deserve a fresh start.

The good news is that the Higher Education Act (HEA) provides for the discharge of students’ federal loans if a school closes before students finish their programs. In fact, the HEA says “the Secretary shall discharge” students’ loans, and the Education Department’s regulations specify that the Secretary will mail each borrower a discharge application and an explanation of the qualifications and procedures for obtaining a discharge.

The bad news is that the HEA does nothing similar to restore students’ eligibility for Pell Grants, which needy students can receive for no more than six academic years. Because the law doesn’t reset the clock on a student’s eligibility for Pell Grants when a school shuts down, low-income students may not be eligible for enough aid to complete a program anywhere else.

For example, the students enrolled in the pharmacy technician certificate program at Corinthian’s Everest College in West Los Angeles – which cost more than $11,000, and had a 25% job placement rate and a 35% student loan default rate – will be able to get their federal loans discharged, but they won’t get their Pell Grant eligibility restored to what it was before they enrolled at Everest. As a result, they may not have enough Pell Grant eligibility left to complete the much lower cost pharmacy tech program at the nearby community college.

For the more than 12,000 Pell Grant recipients estimated to be enrolled at the Corinthian campuses that suddenly closed yesterday, this is an oversight needing swift correction.

How did Pell Grants get left out of the closed-school provisions? Prior to 2008, students could receive Pell Grants for as long as they were making satisfactory academic progress towards a degree or certificate. So if a school closed before a student could finish, the student didn’t need to worry about their Pell Grant eligibility running out.

However, in 2008 Congress limited future Pell Grant eligibility to nine years. Then, in 2011 Congress lowered this lifetime limit to six years and applied the new limit immediately and retroactively to all students, including those just a semester away from completing their degrees.

Unfortunately, Congress didn’t amend the HEA to restore students’ eligibility for Pell Grants when a school closes before they can finish. This was likely an oversight, not a conscious policy decision. As a result, the lowest income students at Corinthian campuses may not have enough Pell Grant eligibility left to complete a program at another school.

It’s time to fix this harmful omission. In the last Congress, Representative Janice Hahn introduced the Protecting Students from Failing Institutions Act (HR 4860) to restore Pell Grant eligibility for students at campuses that close. We recommend going a step further: Pell Grant eligibility should be restored for any student who has their federal student loans discharged, either because their school closed or because of school fraud. Current and former Corinthian students deserve a true fresh start and the chance to get a meaningful degree or certificate at another school.

While the President’s proposed budget fully funds the scheduled increases in the maximum Pell Grant and continues to tie it to inflation after 2017, the FY16 House and Senate budget proposals freeze the maximum Pell Grant for 10 years. As recently as the mid 1980s, the maximum Pell Grant covered more than half of the average annual cost of attending a four-year public college. Freezing the maximum grant for the next 10 years would reduce the share of covered costs from an already record low of 29 percent in 2015-16 to just 20 percent by 2025-26, making college even less affordable.

Sources: Calculations by TICAS on data from the College Board, 2014,Trends in College Pricing 2014, Table 2, http://bit.ly/1F9qoJv; and U.S. Department of Education data on the maximum Pell Grant. The maximum Pell Grant for 2015-16 was announced in the Department of Education’s Pell Grant Payment and Disbursement Schedules,http://ifap.ed.gov/dpcletters/GEN1502.html. College costs are defined here as average total in-state tuition, fees, and room and board costs at public four-year colleges. Projected college costs for future years were estimated by using the average annual increase in costs over the most recent five years.

When too many borrowers default on their student loans, colleges can lose eligibility for federal aid. Colleges with a cohort default rate (CDR) above 40% lose eligibility to offer federal loans, and colleges with three consecutive CDRs at or above 30% lose eligibility to offer both loans and federal Pell Grants.

While some question the wisdom of tying colleges’ eligibility for federal grants to the outcomes of students who borrow federal loans, the link between Pell Grants and CDRs is incredibly important. That’s because federal taxpayers invest tens of billions of dollars in Pell Grants, and CDRs are the primary means of assessing whether colleges are a good investment for federal aid. Colleges can already avoid sanctions through challenges and appeals when relatively few of their students borrow.

To avoid losing access to Pell Grants, the most common form of financial aid for community college students, many schools are examining what they can do to help students avoid default. However, other colleges are citing fears of such sanctions for their decision to stop offering federal loans altogether - even schools that are at very low risk of sanctions. Cutting off access to federal student loans in this way is a problem because it forces students who can’t otherwise afford to stay in school to turn to much riskier types of borrowing, or to reduce their odds of completion by cutting back on classes, working long hours, or dropping out altogether.

Concerns about CDR sanctions have led some to argue that colleges’ eligibility for federal grants should not be tied to an outcome measure for federal loans, and that delinking grants from CDR sanctions might stop colleges from pulling out of the federal loan program. But if the goal is to ensure students are well served and have access to federal loans when they need them, then the logic behind arguments to delink Pell and CDR sanctions falls short on multiple fronts.

It wrongly presumes that default rates are entirely out of colleges’ control. In reality, colleges have a number of tools to prevent defaults and keep CDRs within acceptable levels. Given the severe consequences for each individual student who defaults, it’s imperative that colleges use every tool in their toolbox to keep borrowers on track. But as the New York Times recently editorialized, “[W]hat is likely to persuade colleges to deploy these tools in the first place is the threat of losing federal aid if they do not.” Indeed, the threat of losing eligibility for Pell Grants is focusing colleges on what more than can do to keep their students out of default.

With no incentive for colleges to keep students out of default, they will invest less in default prevention. This is not a statement about the character of student services professionals at community colleges, but rather about the obstacles they will face when trying to convince college leaders how scarce (and decreasing) resources should be spent. And when loan defaults increase as a result, the college will lose eligibility to offer loans. So while colleges may be less likely to pull out of the loan program proactively if Pell and CDR sanctions are delinked, they will be more likely to be forced out of the loan program based on their default rate. The threat of losing federal loan eligibility is not going to be enough of an incentive for colleges to focus on keeping defaults down if they’re already considering opting out of the loan program. The end results? First, more community college students in default, and then far more without any access to federal student loans.

The upshot: delinking Pell and CDR sanctions will not help students. Most community college students do not borrow federal loans. But students who do need to borrow should have access to federal loans, and it’s entirely appropriate to hold colleges deemed worthy of taxpayer investment by the federal government accountable.

The nonpartisan Congressional Budget Office (CBO) recently released a report that explores the growth in the Pell Grant program between 2006-07 and 2010-11, citing factors such as the economic downturn and legislated policy changes. We are planning to dig deeper into the CBO’s analysis over the coming weeks, but wanted to highlight one important point in the report.

Although the cost of the Pell Grant program increased substantially between 2006-07 and 2010-11, that pace of growth is not expected to continue. In fact, CBO projects almost no annual growth in Pell Grant program costs between 2012-13 and 2023-24, after adjusting for inflation. Over that entire 11-year period, the program’s costs are only projected to increase by 1% in real terms.

It’s clearly time for policymakers to stop asking whether Pell Grants are sustainable and focus instead on whether they’re sufficient. Even after recent increases, the maximum grant covers the smallest share of the cost of attending a four-year public college since the start of the program. Pell Grant recipients are more than twice as likely as other students to have to borrow to pay for college. The CBO data drive home the need for a comprehensive approach to financial aid and higher education policy, so that all students who are willing to study hard can afford to go to college and graduate.